Cannabis businesses still depend heavily on non-admitted insurers for coverage, and available limits can fall well short of what larger operators need. A renewed push in Congress could remove one of the federal barriers that has kept more carriers from entering the market.
Representatives Nydia Velázquez, D-N.Y., and Warren Davidson, R-Ohio, introduced the Clarifying Law Around Insurance of Marijuana Act on September 16. The legislation would protect insurers, agents and brokers from certain federal penalties and liabilities for serving cannabis businesses operating legally under state, local or tribal law.
The proposal lands in a market where capacity remains uneven. The National Association of Insurance Commissioners says most commercial insurance for cannabis-related businesses is still placed in the non-admitted market, with gaps particularly affecting smaller companies, ancillary services, cannabis-infused products and social consumption lounges.
Coverage limits can also be a constraint. The NAIC says insurers commonly offer $1 million per occurrence and $2 million aggregate limits across commercial general liability, property and product liability, while some businesses may require $5 million to $10 million or more.
That makes the federal safe harbor potentially significant for carrier participation. It would not require insurers to write cannabis risks or change the underlying exposures, but it would remove federal legal consequences solely arising from insuring a qualifying cannabis business.
“Because of the conflict between federal and state law, insurers are still hesitant to write policies for cannabis businesses. That means thousands of legal small businesses are operating without a safety net. One fire or one storm could wipe out everything an owner has built, with no way to recover. The CLAIM Act fixes this by giving these entrepreneurs access to the same basic insurance protections every other legal business takes for granted,” Velázquez said.
Under the bill, federal agencies could not prohibit, penalize or discourage an insurer from covering a qualifying cannabis business solely because of its cannabis activities. Regulators would also be barred from pressuring carriers to cancel, downgrade or limit coverage on that basis.
A Senate version of the CLAIM Act was introduced in July by Sens. Kevin Cramer, R-N.D., and Ruben Gallego, D-Ariz.
Removing federal uncertainty would address only part of the insurance problem. Cannabis operations carry risks including fire, theft, crop loss, workplace accidents and product liability, while policy wording often needs to be tailored to the sector. Those exposures would continue to influence appetite, pricing and capacity even if the legislation becomes law.
Specialist insurers and brokers are already adding capacity and expertise. Conifer Insurance Services launched a higher-limit cannabis program offering up to $25 million in property coverage and $5 million per occurrence for general and product liability. In August, Aon-owned NFP acquired Frontier Risk’s retail cannabis insurance business, adding a specialist team focused on insurance placement and risk management for the sector.
Nine national insurance trade groups have also backed the CLAIM Act, including the American Property Casualty Insurance Association, Council of Insurance Agents & Brokers, Independent Insurance Agents & Brokers of America, National Association of Mutual Insurance Companies and Wholesale & Specialty Insurance Association.
“By resolving the legal uncertainty presented by the dueling state and federal treatment of marijuana, the insurance industry can serve both cannabis-related legitimate businesses and other commercial lines consumers, as well as personal lines consumers who may have a direct or indirect relationship to state-legalized cannabis, and still be in compliance with the law,” the groups wrote.
For now, the placement landscape remains unchanged. Previous versions of the CLAIM Act have failed to become law, and the latest House measure is still at the legislative stage.
